As important as it is to control construction costs in the multi-trillion dollar commercial real estate industry, there is a decided lack of thoroughness and consistency in the contractor bidding process by both general contractors and subcontractors of specific trades. More specifically, general contractors and subcontractors typically do not use the same bid structures, software programs or subcontractor categorization, making it very difficult for tenants, landlords or construction managers to compare (and subsequently negotiate) bids side-by-side and very easy to overlook inconsistencies from bid to bid. Both lack of thoroughness and bid format consistency lead to misjudgments, wasted time and wasted money by the parties involved in a construction project.
When a commercial real estate tenant leases office space, a landlord typically will offer a construction allowance for the tenant to build out their space, since most tenants will design and use their space in very different ways. Once an office lease is signed, there is often a pre-move-in period where the tenant will perform construction alterations to either build out their space from scratch (in the case of a tenant build-out in a space that has never been occupied before) or retrofit existing conditions for the tenant's use. In either case, the job is typically performed by a general contractor who manages the project by scheduling and using various subcontractors to perform the work to be done. The general contractor typically charges a fee for this service.
In return for the fee that the general contractor charges the tenant or landlord (or other party) and in addition to scheduling and arranging to have the work performed for the tenant or landlord, it is the general contractor's job to attempt to have the necessary work done at the most favorable rates (although it should be noted that general contractors do not always simply take the lowest bidder). As such, the general contractor will typically bid out the work to be done to several subcontractors in each trade (generally two to four subcontractors depending on the trade) to secure the most favorable terms for the tenant or landlord. On a typical full scale office build-out, there are typically ten to twelve trades involved. There may be even more trades involved on jobs that are outside a typical office build-out (erecting buildings, highways and plants, for example).
Because the tenant or landlord is also in search of the most favorable rates to complete the job at hand, and because the fees and overhead that general contractors charge can vary depending on contractor, it is common for the tenant or landlord to want to solicit bids from more than one general contractor. In most cases, the tenant or landlord will want to solicit bids from three to four subcontractors, but on certain large projects, or projects that involve public bidding, there can be many more. The tenant or landlord may elect to handle the task of managing the general contractor bidding and selection process or hire a construction manager to handle that task.
The job of the construction manager involves more than just sending out a bid and picking the lowest bidder. In addition to overseeing the job, addressing issues that might arise during the job, processing invoices for payment to the general contractor and conducting the final walk through to ensure that the job was completed as contracted, the construction manager must also review contractor bids and award the bid to the desired general contractor. To perform this part of their work, the construction manager will typically examine the bids submitted by the general contractors that were invited to bid. This examination serves many purposes. First and foremost, the general contractor must make sure that the contractors' bids are being evaluated on an apples-to-apples basis. For example, one general contractor may have exclusions (that will cost the tenant or landlord money) that another general contractor doesn't, thus effectively increasing that contractor's bid amount. For example, the contractor may exclude any Saturday work which may be required for the particular project. Additionally, some items may require the general contractors to provide an allowance for certain items that are either not known or can not be estimated at the current time. Examples of these may be an allowance for appliances that have not been specified yet or an allowance for permits that will not be known until the general contractor subunits the drawings for permit. The construction manager would want to make sure that the allowances were similar between the general contractors and if not, make the appropriate adjustments to put them all on an equal playing level.
The construction manager may also review line items on the general contractors' bids to site any glaring discrepancies or obvious oversights. Although this would again serve to ensure that the contractors are bidding on an-apples-to-apples basis, it would also serve to provide a less time intensive completion to the job because identifying oversights and misinterpretations before the contract is awarded can prevent arguments and disputes once the job is active.
However, the current process of reviewing the bid documents for discrepancies, adjustments in allowances, identification of varying exclusions is not a simple task. The reason for this is lack of a consistent method and system not only from general contractor to general contractor, but from subcontractor to subcontractor. Considering that general contractors typically solicit bids from an average of three subcontractors in each of twelve different trade categories, and that the construction manager would typically solicit bids from at least three different general contractors, an average job may include subcontractor bids from over one hundred possible companies. Additionally, the general contracting industry has no standard format when presenting their line item bid to the construction manager or user. This means that the format of general contractor bids vary from contractor to contractor, complicating the already difficult process. In addition to most likely presenting the bids from the different trades in different orders, different general contractors may include specific work in different trade categories (for example, one general contractor may have a separate line item for demolition while another would include it in general conditions).
In addition, the documentation from subcontractors to the general contractor(s) is not only inconsistent from subcontractor to subcontractor, but in most cases not detailed. Although some subcontractors may submit their bid to the general contractor in formats that are very detailed (usually generated from one of many construction cost estimating programs available on the market) others may simply fax a one line total, while others may send an email or simply give a verbal quote. This array of potential formats from subcontractors makes it very difficult for the construction manager to ensure that all items of the job have been bid on accurately. While leaving out items that a subcontractor might have missed can certainly lead to disputes once the project has begun, over bidding on work that doesn't need to be done will alternatively have the negative effect of adding cost to the project.
At the end of the day, the construction manager is often left to the task of deciphering bids from three (or more) different general contractors who all present their information in different formats (using different software) and who each solicit bids from dozens of subcontractors, with none of the subcontractors using the same software and all with varying degrees of detail. As a result, before a bid is awarded by the construction manager, hours of work are typically spent double-checking bids, confirming inclusions and exclusions by all contractors, recalculating bid amounts and adjusting to put all contractors on an apples-to-apples basis.
A need therefore exists for a multi-tiered web-based software system that allows a construction manager to dictate the format and level of detail that will be presented for not only the general contractors supplying bids, but all of the subcontractors of those general contractors as well.